Did Hedge Funds Make The Right Call On Dynatrace, Inc. (DT) ?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Dynatrace, Inc. (NYSE:DT) based on that data and determine whether they were really smart about the stock.

Is Dynatrace, Inc. (NYSE:DT) a buy here? The best stock pickers were in a bullish mood. The number of long hedge fund positions moved up by 10 in recent months. Our calculations also showed that DT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

To most market participants, hedge funds are seen as slow, old investment vehicles of yesteryear. While there are over 8000 funds trading at present, Our researchers look at the moguls of this club, approximately 850 funds. These money managers oversee bulk of all hedge funds’ total capital, and by paying attention to their top picks, Insider Monkey has discovered various investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .


Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. With all of this in mind we’re going to view the new hedge fund action encompassing Dynatrace, Inc. (NYSE:DT).

How have hedgies been trading Dynatrace, Inc. (NYSE:DT)?

At the end of the first quarter, a total of 35 of the hedge funds tracked by Insider Monkey were long this stock, a change of 40% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards DT over the last 18 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Philippe Laffont’s Coatue Management has the number one position in Dynatrace, Inc. (NYSE:DT), worth close to $273.7 million, amounting to 3.5% of its total 13F portfolio. Coming in second is Mick Hellman of HMI Capital, with a $97.3 million position; 6.5% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions contain Steve Cohen’s Point72 Asset Management, Glen Kacher’s Light Street Capital and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Cota Capital allocated the biggest weight to Dynatrace, Inc. (NYSE:DT), around 7.81% of its 13F portfolio. HMI Capital is also relatively very bullish on the stock, earmarking 6.45 percent of its 13F equity portfolio to DT.

As one would reasonably expect, key hedge funds have been driving this bullishness. HMI Capital, managed by Mick Hellman, initiated the biggest position in Dynatrace, Inc. (NYSE:DT). HMI Capital had $97.3 million invested in the company at the end of the quarter. Josh Donfeld and David Rogers’s Castle Hook Partners also made a $23.8 million investment in the stock during the quarter. The following funds were also among the new DT investors: Bobby Yazdani and Babak Poushanchi’s Cota Capital, Gavin Baker’s Atreides Management, and Israel Englander’s Millennium Management.

Let’s go over hedge fund activity in other stocks similar to Dynatrace, Inc. (NYSE:DT). We will take a look at Dr. Reddy’s Laboratories Limited (NYSE:RDY), Darden Restaurants, Inc. (NYSE:DRI), RenaissanceRe Holdings Ltd. (NYSE:RNR), and Ionis Pharmaceuticals, Inc. (NASDAQ:IONS). This group of stocks’ market values are closest to DT’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RDY 11 112891 -1
DRI 52 879489 19
RNR 30 675791 7
IONS 22 342085 -5
Average 28.75 502564 5

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.75 hedge funds with bullish positions and the average amount invested in these stocks was $503 million. That figure was $726 million in DT’s case. Darden Restaurants, Inc. (NYSE:DRI) is the most popular stock in this table. On the other hand Dr. Reddy’s Laboratories Limited (NYSE:RDY) is the least popular one with only 11 bullish hedge fund positions. Dynatrace, Inc. (NYSE:DT) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on DT as the stock returned 70.3% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Follow Dynatrace Inc. (NYSE:DT)

Disclosure: None. This article was originally published at Insider Monkey.